Jobless rate at 23-year low no help for dollar

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Official unemployment has fallen to its lowest rate in 23 years, following a year-long boom in full-time jobs for men.

But the sparkling 5.5 per cent jobless rate was not enough to stop the dollar from being dumped yesterday, as financial markets responded to the increasing likelihood that interest rates will soon rise throughout the world.

The Bureau of Statistics jobs figures for May drew a mixed reaction.

Citigroup economist Steve Halmarick said it was a "fantastic achievement", noting that unemployment had not been as consistently low since the mid-1970s.

The Minister for Employment, Kevin Andrews, said the numbers were especially strong for those seeking full-time work, reversing the trend towards part time work over the past decade.

More than 147,000 full-time jobs have been created since May last year, compared with 41,000 part-time jobs.

However, others focused on the number of jobs falling by 41,000 in the month after adjustment for seasonal factors.

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The unemployment rate and the number of jobs fell at the same time because the number of people participating in the labour force also fell.

Unusually, only a quarter of the 188,000 new jobs created over the last year went to female workers, the figures show.

Teenage females appeared to miss the recent jobs boom, causing their jobless rate to jump from 23.8 per cent to 25.5 per cent.

Currency markets focused on signs of weakness, rather than strength, in the job figures.

"Moderation in the Australian economy continues," said currency strategist Clifford Bennett. "That doesn't help global sentiment towards the dollar."

The dollar fell more than one US cent to US68.65 cents before recovering to US69.23 cents at 5pm. The trade-weighted index fell from 59.9 to 59.3.

The Reserve Bank of New Zealand, facing broadly similar conditions to Australia, yesterday raised interest rates for the third time this year, to 5.75 per cent.

Japan continued its exceptionally strong run of economic figures, with new machinery orders for April rising 11.8 per cent.

Analysts expected the Bank of England would raise rates last night, while comments by US Federal Reserve members raised expectations that it would begin tightening interest rates next month.

Barry Hughes, an economist with Credit Suisse Asset Management, said the world's central banks were at a turning point, which the Reserve Bank might find difficult to ignore.

"We've had 20 years of global disinflation and interest rates going down," he said.

"We've hit bottom and we're coming up the other side. We don't know how far or how quickly they will go."

The outlook for China presents a question mark for the generally bright global economy. Inflation has hit a seven-year high of 3.8 per cent and authorities have loudly signalled their intention to slow the economy.

Yesterday, industrial production numbers for May fell after seasonal adjustments by Rob Subbaraman, an economist with Lehman Brothers in Tokyo.

"I think with today's data, and money supply and bank lending weakening to its slowest pace in over a year, you can now make a stronger case that the Chinese economy is indeed slowing," he said.